Quick VAT on Fuel Purchases query

[Tony427]

I'm starting a new job and the company leases me a car, insures, taxes and maintains the car and I buy the fuel.

I then claim the fuel costs pertaining to business mileage only, on a ?pence per mile basis , which will equate to about 50% of my 40,000 miles per year.

The company has instructed me to hand in all my VAT receipts when I buy fuel so that they can claim the VAT back.

Two questions .

1. Surely it is illegal for the company to claim back the VAT on my personal mileage?

2. Is it legal for the company to claim back the VAT on purchases they haven't made, even though they are paying me a mileage allowance for my business use fuel costs?

Its the first time I've been faced with this method of running a company car and I'd like to know the legalities without going direct to the C&E.

Cheers,

Tony

[Eric Mc]

No, the company CAN claim back the Input VAT on the business elelment of the fuel costs you have incurred.

To do that, they MUST be able to produce a valid VAT invoice - which is why they have asked you to furnish to them your fuel receipts.

[Tony427]

Thanks for that Eric, I'll have to make sure that they don't claim the VAT on my private mileage and restrict their claims to the business element only.

However, its buggared up my get rich quick scheme of using central heating oil stored in a tank at home to run the car......no usable receipts that way !!

Cheers,

Tony

[Eric Mc]

You don't have any responsibility to make sure THEY claim the correct VAT. They know the business miles you did. It's up to them to reclaim the correct VAT content.

[paoloh]

Tony427 said:

Thanks for that Eric, I'll have to make sure that they don't claim the VAT on my private mileage and restrict their claims to the business element only.

However, its buggared up my get rich quick scheme of using central heating oil stored in a tank at home to run the car......no usable receipts that way !!

Cheers,

Tony

Why are you concerned with what they claim back??

You seem to be on a good deal, if they want to claim a little extra VAT, so what?

Also, how are you going to make sure? Pop into co. accountant and ask what VAT he claimed?? You'd be laughed out the office!

[pugwash4x4]

eric i'm sure i've got this wrong,

but the VAT office have just introduced some really "simple" rules that i still haven't got my head around. bascially in certain circumstances a VAT payable entity pays a monthly fee and then claims back ALL of the vat for the cars mileage- business and personal. they're supposed to be sending me more details but i don't reckon i'll get them anyway!

[Eric Mc]

That sounds suspiciously like the VAT Fuel Scale Charge Scheme - which has been in place over 20 years.

[Tony427]

paoloh said:

Tony427 said:

Thanks for that Eric, I'll have to make sure that they don't claim the VAT on my private mileage and restrict their claims to the business element only.

However, its buggared up my get rich quick scheme of using central heating oil stored in a tank at home to run the car......no usable receipts that way !!

Cheers,

Tony

Why are you concerned with what they claim back??

You seem to be on a good deal, if they want to claim a little extra VAT, so what?

Also, how are you going to make sure? Pop into co. accountant and ask what VAT he claimed?? You'd be laughed out the office!

As a Director of the business I have a duty to ensure that the company is run properly and we dont try to defraud the VAT man.

A close friend has just lost over £25k because the VAT guys didn't like the advice his accountant had given and thought they had been shortchanged over a few years.

My friend was blameless, it was bad advice from an accountant, but it was he who had to go to court, he who had to appeal the decision, he who had to pay up in full within 8 days, and he who had to raise the cash.............

I think that with VAT is better to err on the side of caution. And yes I will be asking the finacial controller if he is only claiming the correct business mileage element, and if an attempt is made to laugh me out of the office I shall immediately dismiss said controller for gross misconduct for attempting to carry out a fraud upon Her Majesty's government.

I'm not standing in the dock for anyone !!

Cheers,

Tony

[Eric Mc]

Tony - you didn't make it clear in your earlier post that you were a director rather than an employee. That does change the entire situation in that you DO have responsibility for the actions of the company and it would only be right and proper that you ensured that the company's VAT returns are completed correctly.

HMRC changed the rules on how Input VAT is claimed on the petrol element of employee/director mileage claims. Up until January 2006 they allowed businesses to reclaim the VAT content of 50% of the mileage amount being claimed. In addition, they did not insist that original petrol/fuel vouchers be retained to support the VAT claim. The theory being that the employee/director's mileage claim form would provide the paper backup. A European ruling against the Dutch VAT authorities changed this approach.

The details below have been "borrowed" from another website but set out the correct procedures that should be followed. As you can see, what had been quite a simple system has now become rather complicated and open to various permutations and interpretations.
The details below are a few years old now so it might be worthwhile your accountant digging out the latest version of the mileage rates etc so that the claims can be made based on current fuel costs.

Extract

The European Court of Justice ruling dated 8 November 2001 caused HMRC to revise the position described below. With effect from 1 January 2006, it is still possible to recover input VAT in mileage claims, but only if the employee also provides invoices covering fuel purchases. The invoice can be a full VAT invoice or a less detailed VAT invoice but you should ask your employees to get them and then retain them with the mileage claims. There is no direct link between the fuel purchase and the mileage, but a much earlier or later invoice would appear to be irrelevant, so why not ask employees for all their current invoices?

Where a VAT registered business reimburses an employee for the cost of fuel, for a number of years it has been possible to treat the VAT element of that reimbursement as input VAT of the business.

C&E VAT Notice 700/64: Motoring Expenses states that for each employee there must be a record showing -

the mileage travelled
whether the journey is business or private
the cylinder capacity of the vehicle
the rate of mileage allowance
the amount of input tax claimed
As far as we know HMC&E have not published details of fuel cost, but as at February 2002 the Inland Revenue website states "Customs and Excise will also accept the figures in the table for VAT purposes" referring to it's new advisory figures for Mileage Rates (Fuel Only).

Alternatively, the business can continue to determine the petrol element of mileage allowances, either by detailed records from the employee, or using AA published estimated petrol running costs as below, (pence per mile) -

Cost new Up to £10,000 £10,000 to £13,000 £13,000 to £20,000 £20,000 to £30,000 Over £30,000
May 2003 7.98 9.98 11.97 12.83 17.10
Adjustment*
0.10 0.13 0.15 0.16 0.22

• The May 2003 costs per mile are based on unleaded petrol at 79.0p per litre. For every penny more or less add or subtract the adjustment to the basic cost. Unfortunately we have not seen these figures officially updated.

The VAT cost is 7/47 of the above figures while VAT is 17.5%.

Beware the restriction of input VAT on cars including leased cars.

Edited by Eric Mc on Monday 18th June 07:57

[paoloh]

Tony427 said:

paoloh said:

Tony427 said:

Thanks for that Eric, I'll have to make sure that they don't claim the VAT on my private mileage and restrict their claims to the business element only.

However, its buggared up my get rich quick scheme of using central heating oil stored in a tank at home to run the car......no usable receipts that way !!

Cheers,

Tony

Why are you concerned with what they claim back??

You seem to be on a good deal, if they want to claim a little extra VAT, so what?

Also, how are you going to make sure? Pop into co. accountant and ask what VAT he claimed?? You'd be laughed out the office!

As a Director of the business I have a duty to ensure that the company is run properly and we dont try to defraud the VAT man.

A close friend has just lost over £25k because the VAT guys didn't like the advice his accountant had given and thought they had been shortchanged over a few years.

My friend was blameless, it was bad advice from an accountant, but it was he who had to go to court, he who had to appeal the decision, he who had to pay up in full within 8 days, and he who had to raise the cash.............

I think that with VAT is better to err on the side of caution. And yes I will be asking the finacial controller if he is only claiming the correct business mileage element, and if an attempt is made to laugh me out of the office I shall immediately dismiss said controller for gross misconduct for attempting to carry out a fraud upon Her Majesty's government.

I'm not standing in the dock for anyone !!

Cheers,

Tony


You said youy were being employed. You should have made it clear about being a director!!